Payments require the use of a payment instrument, be it fiduciary currency (coins and notes) or other payment instruments like bank transfers, cheques, debit or credit cards, or electronic money.
Contrary to fiduciary money, which is directly exchanged, the use of these payment instruments involves that the funds are transferred from the payment account of the payer to the payment account of the payee. As accounts are often held in different payment institutions, transfers from one institution to the other are executed through an interbank payment system.
A payment system can be defined as a set of instruments, banking procedures and, typically, interbank funds transfer systems that ensure the circulation of money (in its broad meaning).
Various types of payment systems exist, for instance, settlements can be continuous (real-time) or deferred, transactions can be settled individually for the gross amount or netted. Hence, it is common to have separate payment systems for large-value payments and for retail payments.
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